CROATIA IN THE EU
As of 1 July 2013 Croatia has become a member of the European Union, but what kind of tax benefits can its accession provide?
One of the most important changes is that customs controls vis-a-vis the other EU member states will be abolished. This does not affect those particular controls which are related to the Schengen Area, as these will continue to be in force. In practice, this means that personal identification documents (passport, ID card) will be controlled by police at the common borders with other EU countries.
Individuals from the EU will be able to bring in goods purchased in Croatia with no limit on value and without having to pay duty or value added tax on such goods. Neither will there be any need to declare imports of cash in excess of an amount of EUR 10,000. Restrictions on product quantity will also cease, however, this will not extend to excise goods or medicinal products. There will similarly be no need to declare imports of cash or securities in excess of an amount of EUR 10,000.
Croatia had already adopted the common EU rules on VAT even before accession, as of 25 June 2013. Thus the same rules will apply, inter alia, as regards place of supply and invoicing, as is the case in the other member states.
As far as tax optimisation or offshore environment goes, establishing a company in Croatia does not offer any particular advantages, as the corporate tax rate is 20% and the standard VAT rate is 25%. However, as a consequence of her accession, Croatia has had to incorporate into her tax system a number of factors which are beneficial to EU company investments in Croatia. As a rule, Croatia levies 12% withholding tax on dividends leaving the country, whereas in the case of sums of interest and royalties the rate is 15%. This system is now superseded by the fact that, henceforth, in certain cases, Croatia will not be able to impose any withholding tax on dividends, interest and royalties paid out to the other member states. Where, for example, dividends are paid into an offshore location, the withholding tax may still be levied. Tax arrangements related to offshore companies are becoming increasingly widespread in Croatia, something which is further demonstrated by the fact that numerous yachts registered in offshore locations can now be found in the local harbours.
As far as banking secrecy is concerned, it is important to highlight the fact that Croatia has accepted the disclosure obligation relating to the personal savings of private EU individuals. As a result Croatia will, by 31 March 2014, be obliged to forward to the tax authorities of other member states information concerning the amounts of interest credited to domestic Croatian bank accounts held by private EU individuals
One of the most important changes is that customs controls vis-a-vis the other EU member states will be abolished. This does not affect those particular controls which are related to the Schengen Area, as these will continue to be in force. In practice, this means that personal identification documents (passport, ID card) will be controlled by police at the common borders with other EU countries.
Individuals from the EU will be able to bring in goods purchased in Croatia with no limit on value and without having to pay duty or value added tax on such goods. Neither will there be any need to declare imports of cash in excess of an amount of EUR 10,000. Restrictions on product quantity will also cease, however, this will not extend to excise goods or medicinal products. There will similarly be no need to declare imports of cash or securities in excess of an amount of EUR 10,000.
Croatia had already adopted the common EU rules on VAT even before accession, as of 25 June 2013. Thus the same rules will apply, inter alia, as regards place of supply and invoicing, as is the case in the other member states.
As far as tax optimisation or offshore environment goes, establishing a company in Croatia does not offer any particular advantages, as the corporate tax rate is 20% and the standard VAT rate is 25%. However, as a consequence of her accession, Croatia has had to incorporate into her tax system a number of factors which are beneficial to EU company investments in Croatia. As a rule, Croatia levies 12% withholding tax on dividends leaving the country, whereas in the case of sums of interest and royalties the rate is 15%. This system is now superseded by the fact that, henceforth, in certain cases, Croatia will not be able to impose any withholding tax on dividends, interest and royalties paid out to the other member states. Where, for example, dividends are paid into an offshore location, the withholding tax may still be levied. Tax arrangements related to offshore companies are becoming increasingly widespread in Croatia, something which is further demonstrated by the fact that numerous yachts registered in offshore locations can now be found in the local harbours.
As far as banking secrecy is concerned, it is important to highlight the fact that Croatia has accepted the disclosure obligation relating to the personal savings of private EU individuals. As a result Croatia will, by 31 March 2014, be obliged to forward to the tax authorities of other member states information concerning the amounts of interest credited to domestic Croatian bank accounts held by private EU individuals
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